The entertainment industry and Wall Street will be paying close attention to Disney’s annual shareholder meeting on Wednesday (April 3).
That is when the 12-person board will finally be revealed after a protracted proxy battle between the company led by CEO Bob Iger and the billionaire activist investor Nelson Peltz, who co-founded Trian Fund Management which controls approximately $3bn of Disney stock.
Each side has mounted multi-million dollar campaigns to persuade institutional and individual or retail shareholders to elect their preferred board directors. The latter group may play a key role in the vote as they collectively hold some 40% of stock
On Monday The Wall Street Journal cited unnamed sources who claimed Disney was slightly ahead in the vote – which ends at 11.59pm ET on Tuesday – after more than 50% of ballots had been cast.
Supporters on both sides
Among supporters, the report said, was asset manager BlackRock, which is Disney’s second largest institutional investor with an approximately 6.6% stake according to the website Investopedia, behind investment advisor Vanguard Group on 8%.
Star Wars creator George Lucas, a substantial holder of Disney stock after he sold Lucasfilm to Disney for $4bn in 2012, recently came out in favour of Iger-led Disney, as did former Disney chairman and CEO Michael Eisner. The grandchildren of Walt and Roy Disney have also thrown their support behind Disney, as have proxy voting advisors Glass Lewis.
Investment firm Institutional Shareholder Services has recommended voting for Peltz and 11 of Disney’s candidates for the board, and Egan-Jones Ratings Company has also backed Peltz and his “running mate” for a board seat, the former Disney CFO Jay Rasulo.
Iger and Peltz hold different ideas on how Disney should be run and how to boost its stock, which has climbed 34% since January 1 but tumbled 38% in the last three years. Disney’s market cap is around $229bn.
Disney wants shareholders to trust in its vision under Iger, who vowed to turn the ship around after a disappointing 2023 characterised by tentpole misfires and conceding the box office crown to Universal.
Iger has emphasised a new focus on fewer, higher quality films and in February he essentially used the company’s Q1 earnings to make his case to voters.
He touted solid financials, reiterated that Disney’s direct-to-consumer business would achieve profitability in the fourth quarter of this year, and spoke about an ambitious games and entertainment universe. Autumn brings the launch of an untitled sports bundle incorporating Disney/ESPN, Fox Sports, and Warner Bros Discovery.
In the Q1 call with analysts, Iger briefly referred to the proxy fight as a distraction and asserted the succession issue would be handled at the appropriate time.
What Peltz wants
Peltz, whose aspiring actress daughter Nicola is married to football legend David Beckham’s son Brooklyn, has history with Disney. He rattled the cage in early 2023 and went away when Iger implemented cost cuts and laid off around 8,000 staffers. Now Peltz, who won a proxy fight with Procter & Gamble in 2017 and secured a seat on that board, is back.
He is bidding to win two seats on the board for himself and Rasulo, at the expense of Disney nominees Maria Elena Lagomasino and Michael Froman. To add spice to the recipe, Peltz has the support of Ike Perlmutter, the former head of Marvel Entertainment, who has an axe to grind after Disney let him go last year.
In a 133-page white paper on the website ‘Restore The Magic’, Trian said Disney needs to refresh a stale board and return shareholder value. It highlighted deteriorating financials from 2018, the year before Disney’s ”flawed” $71.3bn acquisition of the 21st Century Fox entertainment assets.
Among other things the manifesto argued for a streaming strategy which will return a “Netflix-like” 15-20% margin by 2027; cutting costs at the legacy business; rethinking strategy on linear assets; and coming up with a digital strategy for sports hub ESPN.
Disney has said Peltz has no plan to create shareholder value and would bring no “additive” skills to the board.
Succession issue
Another hot button issue is who will take over once Iger’s contract expires at the end of 2026. Peltz has been critical of how Disney handled the brief Bob Chapek regime. Initially cast as Iger’s successor in 2020, Chapek unwittingly switched to the role of predecessor after he was fired in late 2022 following several gruelling pandemic years. Iger, 73, assumed the reins again in November 2022.
The Disney board is understood to be looking at four internal leaders for the top job when Iger finally bows out: Alan Bergman from film, Dana Walden at television, Josh D’Amaro at the high-performing parks division, and ESPN chairman Jimmy Pitar. The eventual choice will be critical to the media giant’s direction.
In an interview with the Financial Times less than two weeks ago Peltz indicated he was prepared to work with Iger. In a remark possibly designed to appeal to retail investors, who traditionally do not turn in numbers to vote and tend to side with management, he questioned the need for all-female and all-black casts on Marvel films.
That drew a rebuke from Blackwells Capital, which also has a dog in the proxy fight and wants voters to choose three of its own candidates – former Warner Bros executive Jessica Schell, Tribeca Film Festival co-founder Craig Hatkoff, and Leah Solivan, founder of the online odd-jobs market TaskRabbit – and has advocated for spinning off Disney’s real estate holdings.
The virtual annual shareholders meeting takes place at 1pm ET on Wednesday. After that, Disney will either maintain course or need to accommodate a highly opinionated new board member.
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